Transforming Oleochemical Landscape -The Way Forward for ... · C R E A T I N G V A L U E | www. emeryoleo.com Slide 12. AGGRESSIVE ASIA CAPACITY EXPANSION Majority of global fatty

Transforming Oleochemical Landscape - The Way Forward for South East Asia

PIPOC201117th November 2011

Kongkrapan Intarajang, Ph.D.

Group CEO

EMERY OLEOCHEMICALS GROUP

Global Oleochemical Industry Overview

• Macroeconomic overview

• Oleochemical Industry Review

• Key factors Affecting the Market

Asia Oleochemical Industry Outlook

• Background

• Trends and Capacity Expansion

• Market drivers and restraints

• Key Success Factors

Future Growth Direction for Emery Oleochemicals

AGENDA

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2009

• Global contraction.

•Weak start to the year.

• Initial indications of recovery by 2H.

2010

• Recovery momentum continued, strong business performance.

• Chemical industry had a very positive year for earnings and debt-financing.

WORLD ECONOMY AT A GLANCE

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2011

• Global real GDP growth expected to ease from 3.8% in 2010 to 3.2% in 2011.

• EU continues to struggle with a faltering financial-sector and fiscal stresses.

• US GDP growth sluggish due to economic slowdown, fiscal tightening and EU’s fiscal stress spill-over.

• Developing economies expected to expand by at least 6.3% vs. high income economies at 2.2%.

Source: International Monetary Fund, World Economic Outlook Database, September 2011The World Bank, Prospects for the Global Economy.Goldman Sachs, The Outlook for the US Economy, August 2011

WORLD GDP GROWTHEconomic activity in most developing countries has recovered

-2.1%

4.5%4.0%

-2.6%

2.6% 2.7%

-0.8%

4.9% 4.4%

-4.1%

1.7%1.9%

EUROPEAN UNION

LATIN AMERICA& CARRIBBEAN

UNITED STATES

NORTH ASIA

2.8%

1.9%

4.0%

MIDDLE EAST &NORTH AFRICA

1.7%

5.4% 5.9%

ASEAN

7.2%

8.4% 8.5%

DEVELOPING ASIA

Source: International Monetary Fund, World Economic Outlook Database, September 2011The World Bank, Prospects for the Global Economy.

-2.2%

3.2% 3.6%

WORLD2009

2011

2013

Legend: GDP Growth


• Domestic demand in developing countries expected to drive world economic growth.

• However, uncertain commodity & energy outlook, and lingering post-crisis difficulties in the US and EU pose downside risks.

GLOBAL RECOVERY LED BY DEVELOPING ASIAStronger than average recovery supported by Indian and Chinese demand growth

Source: The World Bank, Prospects for the Global Economy

2009

2011

2013

Legend: GDP Growth

WORLD

9.1%9.3% 8.8%

CHINA

Pop. 20111,346 mil

9.1% 8.0% 8.5%

INDIA

Pop. 20111,241 mil

1.7%

5.4% 5.9%

ASEAN-5

Pop. 2011438 mil

• Intra-region trading expected to expand for 2011 and 2012.

7.4%

8.5% 8.2%

EAST ASIA &PACIFIC

• East Asia and Pacific region led global recovery in 2009 and 2010.

• Growth rates exceed world average significantly.

• Demand driven by strong internal demand in China, India and also ASEAN-5.


-2.2%

3.2% 3.6%

• ASEAN Economic Community will further spur ASEAN countries’ economic growth beyond 2015

OLEOCHEMICAL INDUSTRY IN REVIEWRecovery period resulting in rationalisation opportunities

2008 2009 2010

Year in review Market in disarray.Tough year

continues, some recovery.

Slow global recovery.

Market overview

Demand disappeared in Q4.

US and Europe, 30% downturn in Q1 alone.

Strong recovery momentum in Asia.

SummaryNew capacities coming on stream.

Large capacity overhang.

Highest capacity utilisation in Asia.

Asian producers also looking at European and US opportunities.

Rationalisation activities increase, intra-Asia.


Global economic slowdown late Q3

onwards.

Softening demand due to economic concerns.

ASEAN feed-integrated players enjoy higher capacity

utilisation

2011

Limited rationalisationopportunities.

FATTY ACID SUPPLY AND DEMAND MAPUSA and Europe demand will be supplied via a combination of tallow and palm based material

North America

Europe

China

India

South East Asia

• Major fatty acid market demand continues to be in North America and Europe.

• Significant fatty acid production is currently based on tallow but future expansion is expected to be veg-based.

• China will continue to drive towards self-sufficiency.• India demand will continue to increase at a rate of more than 7% [CAGR].

• South East Asia region will continue to be centre for palm-based fatty acids.

Projected World Consumption CAGR [2010-2020]: 4%

Source: The Outlook for Oleochemicals to 2020, LMC International


KEY FACTORS AFFECTING MARKETBusinesses need to prioritise these key elements in moving forward


Market

Forex

Feedstock availability and

proximity

Government policies and regulationse.g. Bio-diesel

Trade imbalances

Sustainable business practices

Green Movement






• Background





AGENDA


THE LAST 25 YEARS OF OLEOCHEMICAL HISTORYIncreasing pre-eminence in Asia

Traditionally, Oleochemicals produced in North America, Western Europe and Japan

Geographical Shift to Asia:

• Driven by proximity to raw materials.

• Tax incentives and breaks offered by governments.

Ownership Shift:

• Major soapers began exodus.

• Traditional producers began to follow suit.

• New ownership consisting of vertically integrated raw material based companies.

Pre 1980’s

1985-2000

2000 onwards

Big soapers drivingproduction.

Raw Material isthe key.

Integration.


OLEOCHEMICAL TRENDS

• Intra-Asian rationalisation.

• Asian producers evaluating opportunities in Europe and North America.

• Intra-Asian rationalisation.

• Asian producers evaluating opportunities in Europe and North America.

CONSOLIDATION

• Local demand driving future growth, Asian demand for Oleochemicals expected to grow at 5-7% CAGR.

• Specialised product portfolio requirements.

• Local demand driving future growth, Asian demand for Oleochemicals expected to grow at 5-7% CAGR.

• Specialised product portfolio requirements.

ASIAN ECONOMIC GROWTH

• Environmental awareness and sustainability practices, e.g. RSPO.

• New uses and applications based on green products.

• Environmental awareness and sustainability practices, e.g. RSPO.

• New uses and applications based on green products.

GREEN CHEMISTRY


AGGRESSIVE ASIA CAPACITY EXPANSIONMajority of global fatty acid expansion is centred in Asia

Slide 13

Fatty Alcohol Current Future Expansion1

Malaysia 525 100

Indonesia 320 220

China 825 0

India 150

Others 2 360

TOTAL 2,180 420

Fatty Acid Current Future Expansion1

Indonesia 750 1,715

Malaysia 2,110

China 1,270

India 220 265

TOTAL 4,350 1,980


KEY TRENDS• Fatty acid capacity growth is centred in Asia, primarily Indonesia. Growth driven by increasing demand for oleochemicals in Asia, abundance of palm oil and direction of government policies.

• Small scale fatty acids producers will face difficulty sustaining business; size creates economies of scale necessary to survive. Large scale fatty acids producers are venturing downstream to increase captive consumption.

• Tallow will remain an essential feedstock in the US & EU due to its local availability and its preferred use in specific industrial applications. However, veg-based feedstock will exhibit stronger growth due to its application versatility (personal care, food, pharmaceuticals, industrial etc)

1 Source: Emery Oleochemicals Market Intelligence2 Others – Japan, Philippines, Thailand

OLEOCHEMICALS KEY MARKET DRIVERSWorld Oleochemicals production will continue to be dominated by Asian producers

Rank Market Drivers Impact

1-2 Years 3-5 Years

1 Growing markets• Population growth impacting on future demands.• Product portfolio expansion to cater for different region needs.• Impact from critical market segments, e.g. Home and Personal Care• Proximity to customers.

High High

2 Raw Material availability & competitiveness• Value chain pricing back to oils and fats.• Proximity to feedstock.• Sustainable practices [RSPO].

High High

3 Green Movement• Continued push to replace petrochemical based solutions.• New uses and applications based on green chemicals. Low Medium

4 Rationalisation opportunities• Stronger vertical integration.• Investment opportunities within and beyond Asia. Medium High

DRIVERS


THE INCREASING IMPORTANCE OF THE VALUE CHAINLong term sustainability supported by portfolio expansion

EARNINGS STABILITY

COMPETITIVE BARRIERS TO ENTRY

IMPROVED EARNINGSSTABILITY

INCREASED ENTRYBARRIERS

HIGH

HIGH

LOW

LOW


OLEOCHEMICALS KEY MARKET RESTRAINTSHow to grow to the ‘right’ size

Rank Market Restraints Impact

1-2 Years 3-5 Years

1 Long Term Viability• Competitor consolidation.• Achieving the ‘right’ size.• Strategic alliances [technology access, supply networks etc.].

High High

2 Consolidation of customer buying power• Limited number of end-customers.• Customers demanding global support.• Flexibility and expansiveness in product portfolio.

Medium High

3 Legislation and Regulations• REACh, ChAMP.• Sustainability [RSPO].• Trade Barriers.

Medium High

RESTRAINTS


KEY SUCCESS FACTORS FOR AN OLEOCHEMICALS PLAYER

Successful Oleochemicals

Player

Global presence/footprint

Value chain integration

Access to technology

Business platform/Product Portfolio







• Background





AGENDA


Global Presence with Worldwide Distribution Network

Over 170 Years of Oleochemicals Experience

Shareholders with Long-TermCommitment


AN INTRODUCTIONONLY OLEOCHEMICALS COMPANY WITH GLOBAL FOOTPRINT & 170YRS EXPERIENCE

www.emeryoleo.com

OUR

VISIONTo become the world leader

in value added natural based

chemicals.


www.emeryoleo.com

OUR

MISSIONWe are committed to deliver

innovative solutions in natural based

chemicals to our customers and grow

shareholder value through a market

driven approach.

We will accomplish this through the

strengths of our people, partnerships,

R&T capabilities, operational

excellence and total integration of our

business value chain


stWorld ICIS Surfactants Conference, 12-13th May 2011NEW JERSEY, USA

DRIVING DOWN THE VALUE CHAINLONG TERM SUSTAINABILITY SUPPORTED BY PORTFOLIO EXPANSION

OILS AND FATS

BASE OLEO DERIVATIVES CONCEPT MARKET

COMMODITIES SPECIALTIES

VERTICALINTEGRATION

GLOBALPRESENCE

TECHNOLOGYACCESS

HOME AND PERSONAL WELLNESS

BUSINESSPLATFORM

GREEN POLYMER ADDITIVES


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Transforming Oleochemical Landscape -The Way Forward for ... · C R E A T I N G V A L U E | www. emeryoleo.com Slide 12. AGGRESSIVE ASIA CAPACITY EXPANSION Majority of global fatty